Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/248054 
Year of Publication: 
2020
Citation: 
[Journal:] Verslas: Teorija ir praktika / Business: Theory and Practice [ISSN:] 1822-4202 [Volume:] 21 [Issue:] 2 [Publisher:] Vilnius Gediminas Technical University [Place:] Vilnius [Year:] 2020 [Pages:] 545-554
Publisher: 
Vilnius Gediminas Technical University, Vilnius
Abstract: 
The financial distress of state-owned enterprises (SOEs) has become the main focus of numerous researchers due to the ongoing financial burden on the state and their inability to secure independent funding. The purpose of this study is to investigate the variables that affect the financial distress of SOEs in Indonesia that have received government subsidies. This research is a quantitative study conducted using secondary data collected from the Indonesian Stock Exchange, from a total of 19 SOEs from 2014 to 2017. The analysis found that investment (X2INV), leverage (X3LEV), cash flow from operating (X4CFO), and firm size (X5SIZE) have a significant negative effect on financial distress in SOEs. It means that increases in these variables will reduce the potential for corporate financial distress. While the independent working capital (X1WC) variable has no significant effect on financial distress, because it is temporary and has a dynamic change, so it is unable to show its influence on financial distress. SOE's management that receives government subsidies can increase the amount of profitable investment to increase marginal revenue, thereby reducing financial distress. Higher leverage can reduce the level of financial distress, indicating that management uses debt to finance projects that generate higher marginal revenue than marginal costs. This condition has an impact on increasing operating cash flow. The higher the operating cash flow will reduce financial distress.
Subjects: 
financial distress
subsidy
investment
leverage
cash flow from operation
JEL: 
M41
G33
G01
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Article

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